An expat that transferred a pension to a QROPS, in all likelihood, did so as there was no intention to retire in the UK.
Although there are surely question marks over advice to transfer to QROPS, in places like the UAE where expats do not retire and there was always a likelihood of a return to the UK.
What happens upon return to the UK?
There are two options:
- Leave the QROPS in situ, or
- Transfer the QROPS back into a SIPP in the UK.
In both cases, the income in retirement is going to be taxable in the UK. For those expats that were sold on the “Only 90% of the QROPS income is taxable in the UK”, take a look at our opinion on this Only 90% taxed as income . For most, this reasoning was entirely spurious if there was a chance of a return to the UK.
Given the higher fees of a QROPS compared to SIPPs, several hundred pounds a year, given no tax advantage and given the pension is a long way from home- surely a transfer back to the UK to a SIPP is really the best answer for most.
There are always going to be caveats and two spring to mind.
Illiquid, toxic and Non-regulated funds.
A SIPP provider in the UK will not accept such funds to be transferred in-specie ,that may have been sold by offshore advisers. The expat will be left with two options:
- Sell the unregulated investments immediately- if possible, at a loss or with early exit penalties
- Wait for the investments to mature without penalty, or wait for the market to buy their investment. Both mean maintaining the more expensive QROPS for some time, giving extra cost and uncertainty
The Gibraltar Conundrum
The UK introduced Pension Freedom in 2015- this has now been extended to EU QROPS- but not Gibraltar yet!
A Gibraltar QROPS provider will not allow a transfer from Gibraltar to a pension regime that has flexi-access drawdown ( as in the UK ). The SIPP provider may be able to take the transfer provided an undertaken is given that flexi-access will not be given while Gibraltar does not have such flexibility.
The Lifetime Allowance
Those with larger balances that moved to QROPS to avoid the Lifetime Allowance Charge- read our next blog.
Provision of Pensions Advice in the UK
Once resident in the UK, the returning expat can only take pensions advice from a UK FCA regulated adviser and, in nearly all cases, this rules out ongoing advice from the offshore adviser. Additionally, a non-UK adviser does not have access to the full UK SIPP market- simply because only a few SIPP providers will deal with non-UK advisers.
If you are planning a return to the UK and your pension is no longer in the UK, contact a firm that has licences to advise in the UK to look at all your options.